Ashmore Group plc Results for six months ending 31 December 2015 11 February 2016 www.ashmoregroup.com
Overview • Weak markets and negative sentiment continue • AuM of US$49.4 billion at 31 December 2015 vs US$58.9 billion in June 2015 • Net revenues – 29% to £116.4 million Net management fees of £98.7 million, -26% in line with decline in average AuM (-25%) Performance fees of £8.6 million Lower FX translation gains • Adjusted EBITDA of £68.0 million, cost flexibility maintained high margin of 63% • Diluted EPS – 43% to 6.5p • Good cash generation (£56.9 million from operations), strong balance sheet • Interim DPS of 4.55p • After a period of adjustment across Emerging Markets, current yields offer good value against backdrop of robust fundamentals Investment process has been adding risk 2
Markets overview • Index returns over six months to 31 December 2015 Wide range of returns across fixed income and equities, Emerging and Developed Markets Fixed income Equities 5% • Sentiment affected by: Return profile 6m to 31Dec2015 0% Stronger US dollar, clarity over US monetary policy -5% Renminbi devaluation Oil price decline -10% Rising US high yield defaults -15% Geopolitical tension, especially in Middle East -20% Global GDP growth slowing -25% External Local (GBI- Corporate 10yr UST MSCI EM S&P 500 (EMBI) EM) (CEMBI) High/low 6m return Challenging markets, but added risk during periods of weaker prices 3
EM fundamentals are robust Emerging Markets growth premium 8.0 • Emerging Markets have endured substantial headwinds over EM 7.0 DM past three years Growth premium 6.0 Strong US dollar GDP growth (%) 5.0 Significant commodity price declines 4.0 Significant capital outflows 3.0 2.0 Significant increase in funding costs (+200 bps) 1.0 0.0 • Unlike previous cycles, no major casualties 2010 2011 2012 2013 2014 2015 2016E 2017E No balance of payments crises Contrasting developments in EM & DM yields No widespread IMF involvement 12 9.8 No significant change in corporate defaults (3.1% vs 3.6% in Change in yield since end-2006 10 8.8 Current yield 2013) 8 6.8 Only two sovereign defaults, by atypical countries 6 4.9 4.7 Yield (%) 4 1.8 • 2 Fundamentals are robust, rising GDP growth premium 0.5 0.3 0 Less debt and more GDP than DM (21% of world debt, 57% of world GDP) -2 EM/DM GDP premium forecast to expand, first time since 2011 -4 -6 Local bond yields higher than in 2006 when Fed rate was 5.25% Fed funds US 10yr Germany Sov $ IG Corp $ IG Sov $ HY Corp $ HY Sov LC 10yr Spreads of >400bps in external and corporate debt Substantial value available, both absolute and relative to Developed Markets 4
Assets under management • AuM development (US$bn) Gross subscriptions US$3.4 billion, 6% of opening AuM (H1 2014/15: 7%) Broad-based demand, by investment theme, new and existing clients, and client location Increase in alternatives AuM through new capital raising 58.9 • Gross redemptions US$9.1 billion, 15% of opening 49.4 AuM (H1 2014/15: 13%) Influenced by large segregated account AuM at 30 Jun 2015 Subscriptions Redemptions Performance AuM at 31 Dec 2015 redemptions in Q1 External Local Corporate Blended Equities Alternatives Multi-asset Overlay/liquidity Quarterly AuM development (US$bn) • Net outflow US$5.7 billion (H1 2014/15: US$4.5 billion) Q1: -US$4.0 billion, Q2: -US$1.7 billion • Investment performance -US$3.8 billion 58.9 Q1: -US$3.8 billion, Q2: US$nil 49.4 • Average AuM US$53.6 billion (H1 2014/15: US$71.2 AuM at 30 Jun Q1 perf Q1 flows Q2 perf Q2 flows AuM at 31 Dec 2015 2015 billion) Better AuM development in Q2 5
Products and clients AuM by client type • Broad demand for differentiated products with strong performance, e.g.: Central banks Short duration debt was best performing EMD fund in 2015 Sovereign wealth funds 2% 9% 20% 1% (+7.5%) in the Morningstar EAA universe Governments Middle East (#1, +16.1%), Frontier (#3, +6.7%) and Frontier Africa 18% Pension plans 10% (#7, +5.6%) in the top 10 EM equity funds for annualised Corporates/Financial institutions performance over five years per Pensions & Investment / Fund/Sub-advisers 10% Morningstar Third-party intermediaries 30% Foundations/Endowments • Growth in alternatives AuM through new capital raising, to benefit from two of the long-term growth themes in Emerging Markets: Colombian 25-year senior debt infrastructure fund (~US$450m) AuM by client location Private equity to fund healthcare investments in UAE (~US$100m) • Dubai office opened to support healthcare initiative in the broader 20% 22% Americas GCC region Europe ex UK UK • Retail AuM has shown resilience 22% Middle East & Africa 28% Small net inflow from private banks/wealth managers in US and Asia Pacific 8% Europe Overall net outflow represents expected reduction in Japanese retail AuM Diversification and growth initiatives continue 6
Financial results Revenues Six months ended Six months ended 31 December 2015 31 December 2014 Variance £m £m % Management fees 99.3 134.8 (26) Distribution costs (0.6) (1.8) (67) Net management fees 98.7 133.0 (26) Performance fees 8.6 7.0 23 Other revenue 2.1 2.6 (19) Foreign exchange 7.0 21.4 (67) Net revenue 116.4 164.0 (29) • At constant currency: Net management fees -30% Net revenue -37% Net management fees reduced in line with average AuM, lower FX gains 7
Financial results Management fee margins Average net management fee margins (bps) • Average group margin reduced by 3bps YoY 166 and 1bp versus H2 2015 165 164 H1'15 H2'15 H1'16 Prior year period benefited from 1bp non- recurring benefit from distribution accrual release 112 106 106 102 98 98 • Alternatives run-rate is ~135bps, reflecting Colombian infrastructure fund: long-term 66 (25yrs) and debt-focused 64 60 59 58 57 57 56 55 54 54 52 46 45 44 • Theme and product mix, mandate size, and competition will continue to influence margins 19 17 15 Group External Local Corporate Blended Equities Alternatives Multi-asset Overlay/ liquidity Margin reduction as anticipated 8
Financial results Expenses Six months ended Six months ended 31 December 2015 31 December 2014 Variance £m £m % Personnel expenses 12.1 12.4 (2) Other operating expenses 14.2 12.9 10 26.3 25.3 4 Depreciation 0.6 0.6 - Amortisation 1.9 1.7 12 Total operating expenses before VC 28.8 27.6 4 Variable compensation (20% of EBVCIT) 17.5 27.5 (36) Total operating expenses 46.3 55.1 (16) Variable costs flexed to mitigate lower revenues 9
Financial results Other P&L items Six months ended Six months ended 31 December 2015 31 December 2014 Variance £m £m % Net finance income 6.1 6.5 (6) Comprising: - interest income 1.0 0.8 - - seed capital: investment return & FX (5.3) 3.4 - - seed capital: consolidated funds income 10.4 2.3 - Associates & joint ventures (1.0) (1.2) - Result influenced by seed capital: mark-to-market and interest income 10
Financial results Adjusted profits Statutory Seed capital- Adjusted Adjusted H1 2015/16 related items FX translation H1 2015/16 H1 2014/15 £m £m £m £m £m % Net revenue 116.4 - (8.0) 108.4 143.9 (25) Investment securities & third-party interests (12.5) 12.5 - - - - Operating expenses 1 (43.8) 1.8 1.6 (40.4) (47.6) (15) EBITDA 60.1 14.3 (6.4) 68.0 96.3 (29) EBITDA margin 52% - - 63% 67% - Depreciation and amortisation (2.5) - - (2.5) (2.3) (9) Net finance income 6.1 (6.0) 0.9 1.0 0.8 25 Associates and joint ventures (1.0) - - (1.0) (1.2) 17 62.7 8.3 (5.5) 65.5 93.6 (30) Seed capital-related items - (8.3) - (8.3) (0.7) - Foreign exchange translation - - 5.5 5.5 17.8 (69) Profit before tax 62.7 - - 62.7 110.7 (43) 1. For the purposes of presenting ‘Adjusted profits’, operating expenses in H1 2015/16 and H1 2014/15 have been adjusted for the 20% variable compensation on FX translation gains and losses. Profit margin maintained at a high level 11
Financial results Earnings Six months ended Six months ended 31 December 2015 31 December 2014 Variance £m £m % Profit before tax 62.7 110.7 (43) Tax (15.6) (27.4) (43) Profit after tax 47.1 83.3 (43) Profit attributable to non-controlling interests (0.7) (2.3) Profit attributable to equity holders of the parent 46.4 81.0 (43) Earnings per share: basic (p) 6.9 12.0 (43) Earnings per share: diluted (p) 6.5 11.5 (43) Interim dividend per share (p) 4.55 4.55 - • Effective tax rate 24.9% vs 20.0% statutory UK rate due to absence of tax relief on seed capital losses and deferred tax asset reduction on value of unvested shares • Effect of non-operating items on diluted EPS: FX translation (+0.6p), seed capital (-1.0p) Balance sheet strength and cash generation supports dividend 12
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